September 17, 1979
Page 24815
Mr. SCHWEIKER. Mr. President, the biggest difference between them is that I believe the committee recommendation is based on unacceptable inflation that will plague the country.
In a literal sense, a vote for the committee budget is a vote which proclaims to the public that the Congress and the administration cannot work together to slow the price spiral. It is a vote of "no confidence" in the American system of Government. It says the people's representatives cannot act responsibly to solve the No. 1 domestic issue today — inflation. Alternatively, if the Budget Committee inflation assumptions prove wrong, then the people will rightly conclude that all of the talk about austerity is a sham — a cloak to mask rapid spending growth. Congress will have talked conservatively, but have budgeted liberally. The hypocrisy will be impossible to conceal.
I believe we must make it possible for people to buy food, gas, and housing at prices they can afford. I urge my colleagues to vote for my budget changes which assume the Congress will act to make this possible and to allow the American people to maintain their standard of living.
Mr. President, I believe it is essential that when the Senate considers its budget document, that we do not assume, as a matter of fundamental economic, budgeting, and appropriation policy, that we are going to have a 48-percent growth in inflation in the next 5 years. I think that is much too high. The seven leading economists I polled, who cover the spectrum from liberal to conservative, averaged some full 10 percentage points below that. I believe that at least is a target that this country ought to be shooting for.
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. Mr. President, I must say that I find this amendment as difficult to deal with as any which has been offered or is likely to be offered. That is not because there is any particular pressure group or constituency involved on the other side, but because what it asks of me is that, instead of the economic crystal ball which the Budget Committee and the Congress have used over the last 5 years, we should use another one, of Senator SCHWEIKER's contriving, to project future economic events.
The Senator has properly said that the 5-year projections of the Senate Committee on the Budget assume a cumulative 48-percent inflation over the next 5 years. It is of interest, I think, to note that over the past 5 years that figure was 46 percent, only 2 percentage points off from the projection for the next 5 years. I offer that not as being any more accurate an indicator of what will happen than the Senate Budget Committee projects or than Senator SCHWEIKER projects, but merely to point out that, given the inflation experience we have had in recent years, that we are still experiencing, and the upward trend in inflation that we have experienced this year, the Senate Budget Committee is not that much out of line with what is reasonable as we look to the future. Not that it is reasonable to experience 48-percent cumulative inflation over 5 years. I would like to see that zero. But neither Senator SCHWEIKER nor I have come up with any way of limiting inflation so that there is no increase in the budget attributable to inflation between now and 5 years from now. We both assume there is going to be inflation.
So what do we come down to? We come down to this: Is either Senator SCHWEIKER or the Senate Budget Committee more accurate in its vision of the inflationary future? Which? Maybe it
ought to be 50 percent; maybe it ought to be 40 percent; maybe it ought to be 60 percent; maybe it ought to be 20 percent.
What do we do, just arbitrarily pick a figure? Or suppose, as is suggested by the Senator's argument, we ought to take a handful or two handsful of economists and ask them each, individually, to make a projection, add up the figures, divide by the number of economists, and choose that. Is that more rational, more likely to be correct, more likely to be sound than a Schweiker projection or a Senate Budget Committee projection or a CBO projection or an OMB projection? I confess I do not know which is the best.
All I know is that if you have created an institution, as we have, in the congressional budget process and within that institution, if you have created an agency whose business it is to make economic projections, the best way to avoid reshaping and shaping those projections to suit your political inclinations is to rely on that agency as consistently as you can, unless outside events, not our arbitrary judgment, suggest otherwise.
We have used CBO's economic projections as the basis for the entire budget. Changing those economic projections, we change every number, just about every number in the congressional budget resolution.
Now, is that something to do on the Senate floor?
Changing inflation projections changes projections of revenues, not for just 1 year, but for the next 5 years.
Changing inflation projections changes projections of the cost of programs, not for just this year, but for all 5 years.
Changing inflation does not change estimates of the cost of programs uniformly, some will be impacted more seriously than others.
So that if it is the Senate's desire, if we change economic assumptions on the floor and then, proceeding on the basis of those projections, rewrite every number in the congressional budget resolution, that, of course, is the Senate's prerogative. I do not recommend it.
The Senator described his own projections, but let me say this about them. His estimates of the reduction in revenues resulting from his lower inflation projection are somewhat higher than those currently in use by the Senate Budget Committee. Our estimates, using his inflation — and he is proposing to use a 9 percent inflation rate for 1980 — using a 9 percent inflation rate rather than the 9.8 percent assumed by the Senate Budget Committee, would, according to him, result in a reduction of $4.5 billion in revenues in fiscal year 1980.
We would say that ought to be $2.4 billion using his 9. percent. That is a big difference. That is $2.1 billion difference in the fiscal year just ahead of us, changing those inflation numbers.
Should we do that, it would mean raising the deficit, of course, unless we reduce outlays accordingly, and Senator SCHWEIKER would do that. He would propose reducing outlays in fiscal year 1980 by $1.8 billion.
The Congressional Budget Office would say that instead of $1.8 billion reduction in outlays, the 9 percent inflation rate would give us $600 million, or about one-third the amount of reduction in outlay Senator SCHWEIKER suggests.
Where does that put us if we try to change this whole scenario on the floor? Every Senator is then free to make his own economic assumption. He might say, "Well, I like Senator SCHWEIKER's revenue reduction," or "I like the Congressional Budget Office revenue reduction of $2.4 billion because that would have less impact on the deficit than Senator SCHWEIKER's $4.5 billion, but I like CBO's $0.6 billion reduction in outlays better than I like Senator SCHWEIKER's $1.8 billion because that would leave more room for programs.
So we can make any combination we want to, take this outlay reduction, that revenue reduction, that inflation number, that unemployment number, and each of us individually could reshape this budget resolution and the assumptions upon which it is based to suit himself and his own political problems.
I just do not think that is the way to do it, Mr. President.
I yield to my good friend from Illinois.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. PERCY. Mr. President, I appreciate Senator MUSKIE's yielding for a question.
As I understand the Schweiker amendment, it would actually project a deficit of almost $3 billion larger than the Budget Committee's $28 billion projection. Is that correct?
Mr. MUSKIE. Using his own numbers, he comes up with a deficit of $30.7 billionin 1980 compared with the $28.4 billion in the second budget resolution.
Mr. PERCY. I am sympathetic with Senator SCHWEIKER's goal of trying to reduce inflation. In the Humphrey-Hawkins bill we included a goal as a way to try to bring inflation down from the high rates we have experienced in recent years.
I have, however, a problem with this present amendment, as I understand it. I have tried to be sympathetic with the goal of Senator SCHWEIKER but, on. the other hand, also be realistic about the possibility of achieving his lower inflation rates. If we do not meet these lower rates, then what will the effect be on the budget?
I would like to believe we are going to average less than 10 percent inflation this year, but I do not think we will do it. In the first 6 months of 1979, the rate was over 10 percent and it has not shown signs of slackening.
In light of this, is it really realistic to assume next year it will drop all the way down to 9 percent? That is a horrendous rate and yet we are getting used to these figures, unfortunately.
I hope we will bring that inflation rate down. But we should not kid ourselves into thinking we can do it by this means.
Now, what effect does this have if we actually accept the Schweiker amendment? Would that set for us a goal that would somehow anchor us in a little bit more? Or would the lower rates, if we do not achieve them, then make the job of budgeting all that much harder next year? Next year is the real payoff beginning October 1. That is when we have said that, come hell or high water, we will balance the budget and even show a slight surplus in it. That goal, I hope, we will not give up one bit on.
Mr. MUSKIE. I agree with what the Senator is saying.
With respect to revenues, the effect of adopting the Schweiker amendment would be to reduce the revenue aggregates. That might or might not trigger tax cut legislation by the Finance Committee. On revenues, the budget aggregates are a floor, not a ceiling. It may or may not have any impact, really, on tax legislation because the Finance Committee and the Congress may not honor that floor.
With respect to outlays in budget authority, the effect would vary across the board because we did not assume inflation for every item in the budget to the same extent.
There are indexed programs, as the Senator knows, which must reflect inflation fully.
With respect to pay, those figures reflect at least comparability, but, in a sense, inflation, that Congress and the President between them are willing to do so, but the President approved 7 percent, which is below the rate of inflation. So that with respect to pay, I am not sure what the effect of Senator SCHWEIKER's amendment would be.
Seven percent is the effective pay cap because of the President's action. So we could not increase it above that. But Senator SCHWEIKER proposes a 9 percent inflation rate. So that would not be reflected in pay.
With respect to other programs, the effect would really mandate real cuts in many budget functions because we have not allowed fully for inflation.
So with respect to many budget functions, the numbers the Senator proposes, without, I gather, intending to make real cuts in programs, might have that effect in programs I could not now identify quickly.
Mr. PERCY. I thank my distinguished colleague for his explanation.
Could the Senator yield for a unanimous consent request and also for just a quick general comment?
Mr. MUSKIE. Yes.
Mr. PERCY. Mr. President, I wish former Senator Sam Ervin were on the floor today, because of the years we spent together on the Governmental Affairs Committee. I was serving as ranking Republican at the time and Senator Ervin was chairman of the committee. Senator Muskie, you were the lead Senator on the Budget Reform Act, of which I was proud to be a principal cosponsor. I think Senator Ervin would feel that the budget process has exceeded our fondest aspirations.
We were concerned as to whether or not it really would work, whether it would be able to stand up against all the other committees of the Senate, and whether there would be a pulling together.
I think the genius of the selection process that brought Senator MUSKIE and Senator BELLMON together — as Budget Committee chairman and ranking Republican — was probably the best thing that happened to strengthen the new law. Also, I think the principle is fundamentally sound. Both Senators are working from a principle that is right and I know they feel deeply in their hearts that it is good for this country. It is the only procedure Congress has for restoring fiscal integrity to the Government and this country. Both Senators know they are right, and so does everyone else.
This last vote was tough. I have had a lot of telephone calls from Illinois veterans groups today reminding me of who elected CHUCK PERCY last November, who cast their votes for him. And now they want a vote for veterans programs through the Cranston amendment.
All I can say is that I gave a vote for the veterans. I gave a vote that would help keep the integrity of fiscal responsibility.
I think the veterans should be and are in the forefront of wanting to stamp out inflation, to stamp out irresponsible government spending, and to have a reckless Congress, which we have been many years in the past, reined in and under control. We need a cooperative spirit to do that.
The cooperation among the Appropriations Committee, the Budget Committee, and all other committees is rough at times.
I sat — and still do — on the committee that helped create the Budget Committee, the Government Operations Committee. We, too, are faced in this budget with a $100 million cut.
In facing a cut of $100 million, I know it is the tendency of many committee staffs to say, "Our committee is an exception. We can't possibly do it."
When we discussed our own cut last week, I said, "Under no conditions are we an exception. Everyone is an exception in that case. We can't make any exceptions. If we have no exceptions, then it is even-handed with everyone." We simply had to stand by the integrity of the budget process.
I commend the Democratic leadership that has helped work out this compromise. My colleagues on the Republican side are also supporting it. This is not a partisan issue. We all have gotten the message, and we all have taken the pledge. We are going to have fiscal responsibility in this country, and Congress is going to lead it.
The effort in the Budget Committee of working together with every other committee in the Senate is one of the most miraculous things I have seen in my 30 years in government and my 13 years in the Senate. I commend my distinguished colleagues for their inspired and determined leadership, their patience, and their persistence. The budget process is probably one of the finest things that has ever happened to veterans, to consumers, to businessmen, and to labor people. It is adding to the strength of this country by strengthening our economy.
We cannot always talk just military strength. Economic strength is just as important. A key to our economic strength is in the prudent use of taxpayers' dollars. That is why I feel at this time that I would like to bring to the attention of my colleagues the recent interim report of the Inspector General of GSA, Mr. Muellenberg, on the organization and operations of the GSA Inspector General's office.
This is the first report required under the 1978 Inspector General Act, which combined auditing and investigative resources in each of 12 agencies and departments under a single, high level official in each agency reporting directly to the agency head and Congress.
The deplorable scandals at GSA have shaken the confidence of the American people in the management and honesty of their government. I cannot overemphasize the importance of the Inspectors General in ferreting out fraud, corruption, excessive and wasteful spending and mismanagement in GSA and other Federal agencies. This is a goal to which I have been personally committed as ranking minority member of the Governmental Affairs Committee.
During this session of Congress my esteemed colleague, Senator CHILES, and I have carefully reviewed the qualifications of President Carter's nominees for Inspector General for the Departments of Commerce, HUD, Labor, Transportation, Interior and Agriculture, as well as for NASA, SBA, the Veterans' Administration, and GSA. To date we have confirmed 10 Inspectors General and are currently reviewing the nomination for the Community Services Administration.
Regrettably, the President has yet to submit his nomination for the Environmental Protection Agency. I strongly urge the President to direct his attention toward selecting an eminently qualified individual to fill this extremely important position so that the organization and work of the Office of Inspector General at EPA can begin as soon as possible.
Mr. President, no matter how qualified an individual may be to perform the duties of the Inspector General, the enormous task of preventing and detecting fraud and mismanagement in Federal programs cannot be accomplished without the full support of both Congress and the administration. Unfortunately, in a recent report the General Accounting Office stated that Federal audit organizations lack sufficient staffs to carry out their mission, because OMB and several agencies either drastically reduced or denied requests for additional audit staff. In an effort to alleviate this situation, GAO has asked OMB to develop guidelines to help department and agencies determine the number of auditors needed to adequately review Federal programs.
In the case of GSA's Office of Inspector General, I am happy to note that the Senate recently approved a revised budget request to provide $18.9 million and 593 positions for that Office. There can be little doubt that this is money well spent.
During his confirmation hearing I thoroughly questioned GSA Administrator Freeman on his plans for working with Mr. Muellenberg and the Justice Department task force. Mr. Freeman assured me that he would do every-thing possible to support Mr. Muellenberg in his efforts to investigate and prosecute fraud committed both by GSA employees and private contractors.
Based on the present level of investigational activity, Mr. Freeman also made a commitment to the Governmental Affairs Committee to keep Congress well informed of GSA's progress in restoring the integrity of its operations through quarterly meetings with the chairmen and ranking members of the appropriate congressional committees.
I am encouraged by the progress made to date. In his interim report Mr. Muellenberg states that the organizational structure of GSA's Office of Inspector General is in place. The Office of Special Projects is currently assessing the areas most vulnerable to fraud in order to develop a comprehensive plan for auditing and investigating activities.
The Office of Audits will be upgraded to a staff of 450, providing an extensive audit program designed to detect and establish deterrents to fraud and to improve internal control of GSA programs. One important responsibility of the Audit Office is review of GSA self-service store operations to evaluate the effectiveness of strengthened internal controls in the Federal Supply Service. The report also highlights the audit planning of the Office of Audits in various areas such as motor pool operations, public building services, computer sciences, stockpile sales, and disbursements of all types. In addition to reviewing these programs and services, the auditors will provide professional advice to GSA procurement officials on accounting and financial matters to assist in negotiating, award, administration, repricing, and settlement of Government contracts.
The Inspector General's report cites several examples of the cost effectiveness of regular program audits. The General Contract Audit Division since January of this year has issued 43 audit reports recommending savings of $3 million. This translates into a savings of $464 per audit man-hour or a return of $19 on each dollar invested. Mr. President, this is testament to the rewards of giving the Inspectors General our full support. But doing audits and issuing reports is only a first step toward our goal of saving the taxpayers millions of dollars annually. The GSA Inspector General, I am happy to note, also intends to follow up aggressively on completed audits.
The Office of Investigations, with a current staff of 78 investigators has since January opened 487 cases and closed 616. Most of these cases were in the area of white-collar crime, while the remainder dealt with debarment of contractors, misconduct and organized crime checks. The white-collar cases involved investigations of alleged fraud as well as conflicts of interest, bribery and falsification of time and attendance records. To date, the GSA-Justice Task Force combined effort has led to the conviction of 86 Federal employees and several private contractors for defrauding the Government.
Finally, Inspector General Muellenberg has taken the innovative step of complementing the Offices of Audits and Investigations with a new Office of Inspections. This office consists of specialists in engineering, leasing, building management, and other relevant areas who conduct highly technical, professional inspections to determine if work was performed in accordance with specifications, or done at all. The report notes that the assistance provided by the inspectors to the auditors and investigators has contributed to the conviction of three GSA employees and six contractors for defrauding the Government of approximately $2.6 million. These inspectors also have taken actions to insure the debarment of corrupt contractors from Government contracting activities.
Mr. President, I congratulate Administrator Freeman and Inspector General Muellenberg on their efforts to date, and I look forward to working with them in the future to rid GSA of corruption and to restore the faith of the taxpayer in the efficient and honest operations of the Federal Government.
Senator CHILES has been the spearhead in the drive for inspectors general. We have confirmed the nominations of 10 inspectors general. We foresee future interim reports and savings of billions and billions of dollars. These savings can be wrung out of excessive, wasteful government spending just by that process.
As Everett Dirksen said:
A billion there and a billion there, and pretty soon you're talking about real money.
We are talking about real money today, but we also are talking about principles. If we win this battle today on reconciliation, the principle would have been established and we will have done a great service to the country and a great service to the future of the U.S. Senate.
Mr. MUSKIE. I thank the Senator from Illinois. It is appropriate that he should have made reference to an effort under Senator Dirksen a few years ago to accomplish this process.
It is not pleasant to cast the votes we have cast today. To do otherwise I believe would return us to those years, which we remember so well and which we hope are behind us.
Mr. President, I do not want my opposition to the Schweiker amendment to be misunderstood by him or by the Senate. His concern for the forces of inflation is appropriate. His attempt to focus and his attempt to deal with it by this particular means is certainly an appropriate one for us to consider.
I am simply troubled, as I have indicated, by an effort the consequences of which may be to launch us into an extensive and in-depth budget writing process on the floor, which I think would be risky. That is not to say that the Budget Committee is infallible or that CBO is infallible or that anyone else is infallible about projecting the future of inflation.
Let me say a few words about the inflation rate used in our 1980 forecast.
It was estimated by the Congressional Budget Office in July and, right now, inflation in consumer prices is outrunning the CBO forecast in July. Generally, CBO forecasts have tended to under-predict inflation, though they have been more accurate than the administration's.
Our latest comparison of forecasts shows no justification for revising the CBO forecast for 1980.
The average of 40 forecasters for July is three-tenths of 1 percent below CBO.
Chase econometrics, in August, is three-tenths of 1 percent below CBO.
Data resources is three-tenths of 1 percent above CBO.
Wharton, in August, is 1.2 percent above CBO.
So that with respect to 1980, we are in the lower end of the range rather than in the higher end.
For fiscal 1981 through 1984, the Senate Budget Committee projection of inflation incorporates the assumption of a reduced rate of growth in productivity and the effects of the fiscal policy of the first concurrent resolution as approved by the Senate, estimated in accordance with a standard large macroeconomic model.
It certainly would be welcome if inflation were to decline as Senator SCHWEIKER projects, but he offers no reason to believe that this would be the case. If it should turn out to be so in future years, the budget resolutions for those years can be adjusted, when more information is available.
At the present time, many economists are now assuming the core or underlying rate of inflation set by the trend of unit labor costs at around 8 percent. In 1978, unit labor costs rose 8.1 percent; and in the most recent quarter of 1979, it was 10.1 percent above a year earlier.
Energy prices can be expected to rise faster than this underlying rate of inflation, resulting in a higher rate of increase in consumer prices.
We can reduce inflation by holding to restraint in our fiscal and monetary policies, and we urge that. We can reduce inflation by policies to increase productivity and reduce business costs, and we welcome that.
We can reduce inflation by fostering conditions under which the wage/price spiral can be wound down. But we cannot reduce inflation by simply assuming it away.
It is rather ironic, Mr. President, to have an amendment arguing for lower inflation and revenues and a higher fiscal year 1980 deficit just after a debate on the floor in which it was suggested that revenues should be higher in order to keep the deficit down. But that is the way of life for the Budget Committee, so we expect to be confronted with these conflicts.
Mr. BELLMON. Mr. President, will the Senator yield?
Mr. MUSKIE. I yield.
Mr. BELLMON. Mr. President, I simply point out that in the material which Senator SCHWEIKER is using to support his amendment there is a footnote at table A which says :
Economists' inflation rate projections are based on interviews during the week of August 27. Each was asked to provide his projection of consumer price increases for each of the next 5 fiscal years assuming that the economic policies he favored were adopted.
Mr. President, that is a very important caveat. These economists are all having different assumptions, and they are all the ones that each economist personally favors.
I think we have a dangerous trap over here before us. If the Senate gets in the practice of letting economists make their own assumption and then setting an inflation rate accordingly we would be in an impossible situation.
We created the Congressional Budget Office for the purpose of advising the Senate and the House of Representatives, and it seems to me that we have been wise in following their recommendations in most cases in the past. I personally would not want to get away from that practice.
Also, we can continue to work for and strive to get the inflation rate down. Certainly, I intend to do that. The votes we have had here this afternoon in the Chamber indicate the Senate supports that position. But we are not going to make any progress just by wishing inflation to go away or by assuming it is going to go away.
We have to work for that objective. If we do our work properly, then perhaps we can expect that inflation will moderate more rapidly than these assumptions indicate. But I believe in the meantime we have no choice but to go along with the Congressional Budget Office assumption which is what this resolution is based upon.